CROWDFUNDING: UNDERSTANDING, INFLUENCING AND MANAGING GROUP BEHAVIOUR Paul Cockerton
What is crowdfunding? Why do most campaigns fail? Why shouldn’t you aim to raise a million? This chapter answers these questions and offers tips learnt from raising over $30M for clients, to help you navigate through a successful crowdfunding campaign.
• How different crowdfunding platforms work
• Tips and tricks to help your crowdfunding campaign succeed
• When not to launch a crowdfunding campaign
Understanding crowdfunding is a great asset to have in your modern PR toolkit. You can predict how individuals will act as they wait, try to be first, or follow others reacting to a campaign.
There are over 400 crowdfunding platforms, but I’m going to share Dynamo’s experiences from Kickstarter and Indiegogo – two platforms which have raised more than £2.5 billion for projects.
This background knowledge combined with tips and tricks will help you understand why some campaigns can be set up to succeed, whilst others are destined to fail.
1. How crowdfunding works
In most cases, creators launch a time-limited campaign to fund a project or product, asking the public to donate or pre-buy products (usually called pledge levels or perks), frequently discounted and delivered before the product goes on sale to the wider public.
When a pre-set funding goal is reached, the campaign is deemed ‘successful’ and once the campaign finishes the creators go ahead with development, and manufacturing if required, delivering the project or product into its backers hands some months (years) later.
2. Why you should crowdfund
Crowdfunding is not new. In ancient Egypt and Roman times the public were taxed to raise funds.
Modern crowdfunding really started in 1997, when Marillion used the internet to source funds from fans so they could tour the US.
Raising money is not the only benefit you can get from launching a campaign, which may help also explain why well-funded companies launch products on a crowdfunding site.
2.1 Early feedback
Launching publicly, and prior to production, you get immediate feedback for the viability and appetite for your project from a diverse public. Some of the ‘public’ can also be experts in associated fields and help suggest improvements that dramatically affect the direction, adoption and success of your project.
2.2 Community development
Running a campaign can help grow an interested, and invested community prior to product launch. If this community is managed well, they can also become powerful and vocal advocates helping further sales.
2.3 Generating publicity and subsequent interest
Sometimes creators just want publicity and use crowdfunding as a tool. Others want this as a stepping stone to demonstrate initial demand for their project, encouraging further investment from VCs and investors.
But beware. Launching a crowdfunding campaign is no longer in itself news. Media may not be interested, or may only cover you when your campaign is successful.
3. The risks of crowdfunding
On Kickstarter, 65% of campaigns fail to reach their goal.
You’re most at risk if you launch a technology-based campaign, with 82% failing. You’re best off launching a local theatre or arts project, with 61% hitting their goals.
Other platforms, which often have less stringent checks for campaigns, have higher failure rates.
Backers to projects also share risk. Many campaigns have been funded, sometimes into the $millions, and the creators simply didn’t have the skills, experience, or ability to deliver products at scale.
Whilst Kickstarter is an all or nothing platform (your money is only taken if it reaches its goal), the risks for a backer on Indiegogo can be higher as some creators will set campaigns to take backers’ money regardless of whether it hits its goal or not.
Campaigns fail mostly through lack of planning and preparation; poor content; inability to drive an audience to your page; and trying to rush the launch. And perhaps, of course, the product that friends and family found so amazing fails to interest the wider public.
Most of these can be de-risked by learning the right approach from successful campaigns and allowing time for meticulous preparation, planning, and execution. Even then, there are no certainties it will succeed. You will only find this out by launching.
Figure 1 Distribution of funding failure or success since 2008 © DynamoPR
4. The importance of speed and size
Successful campaigns tend to have high velocity of funding, and high numbers of backers within a few days of launch.
The faster a campaign is being funded, the more likely that others will experience Fear Of Missing Out (FOMO) and want to snap up perks or offers before they disappear.
The more people back a campaign, the more legitimate it will appear, diminishing its risk in others’ minds. Campaign viewers will also look at how people are engaging in a campaign, whether through sharing across social media or leaving comments on the campaign page.
The great news is that velocity and crowd engagement can be planned for in advance.
5. How to create a successful campaign
There are many things you can do to de-risk failure. In an increasingly crowded, noisy and competitive market I’ve listed the essentials. These need time, so if I were to suggest just one tip it’s to start planning communications three to four months ahead of launch.
5.1 Video and imagery first
Apart from the headline title, the video is the most critical asset on the campaign page to hold and keep visitors’ attention. They need to be short (less than 2-3 mins), concise, appealing, and look professionally produced. They need to convince the viewer that the creators can deliver. We’ve seen an 80% increase in rate of backer conversion by changing the thumbnail.
5.2 Pledge or perk level strategy
Limiting the availability of certain pledges increases FOMO and hence velocity of backing. Having some heavily discounted pledges also increases backers’ desire to take advantage of time-limited offers.
Some backers will be happy just to donate $1 to keep updated with the campaign, without anything else offered in return. Literally paying to be on a mailing list!
5.3 Build your community in advance
You can’t rely on media alone to make campaigns successful. Ideally you want to have built up a community prior to launch, ready to push the button and back when you go live helping the velocity and number of backers.
Communities take time to build, whether through networking, previews, events, speaking, but are now critical to campaign success. We’ve seen campaigns where communities have accounted for more than 20% of initial backing.
5.4 Plan your communications
It can be an incredibly hectic time post launch, so plan all of your communications before you go live.
This will mean pre-briefing media under embargo. Preparing all of your Q&A for the community, as well as the press. Agreeing a news release of passing the goal, ready to go live (on more than one occasion we’ve had to release this within a few hours of launching).
You should also prepare campaign updates, such as introducing ‘stretch’ targets for when the campaign reaches its goal. Community updates show that you’re talking and investing time in your backers.
As with any public launch, you will have supporters and detractors. Be prepared to respond quickly to any criticism in an open and honest way. This way you’ll generate support from other backers who will more often come to your aid.
6. Don’t publicly aim to raise a million
We’ve had clients walking through Dynamo’s door wanting to raise millions, and we’ve launched a campaign for them where the public goal is under £50,000.
This may seem counter-productive, but we’ve found the lower your goal, the faster that you’ll hit it, and the more you’re subsequently likely to raise.
When you understand that the crowd is waiting for sure-fire hits to back, you’ll understand why many more backers will come on-board when they see a campaign succeed in hitting its goal.
In many of the public’s eyes, a successful campaign is much more of a sure thing. So you want to hit your campaign goal ideally within the first 10 days of your campaign.
That a campaign is ‘successful’ is also news worthy, and an increasing amount of journalists and media will only write about campaigns that have passed their goal, again sharing the campaign wider and increasing chances of further funding.
7. Final thoughts
Crowdfunding is increasingly becoming a popular way to test, develop, and promote a product so that funds and feedback are received before it reaches peoples’ hands.
As I’ve said, nearly two-thirds of all campaigns fail. You stand the best chance of success for your clients if you plan early, focus on communications and content, and lower goals and pledges.
A final warning. If your campaign is wildly successful, you may also need to worry. The more backers you have, the more people you have to communicate with.
We start all client engagements by checking their manufacturing capabilities. Can they scale from an ideal 10,000 units to close to a million? Communication doesn’t end when the campaign ends. We’ve seen many wildly successful campaigns end up in spectacular failure as the complexity of design, manufacturing and delivery increase.
And I have one final disclaimer. I’m assuming throughout that the product you’re planning on launching is novel, interesting, and different. If it’s not, simply don’t bother.
Paul Cockerton is the co-CEO of Dynamo PR, a consumer and technology PR company based in London and Silicon Valley. Dynamo launched the world’s first crowdfunding PR team in 2013, and has won multiple global awards for its work on some of the world’s most successful crowdfunding campaigns.